When did Checkers adopt the new lease standard (ASC 842)?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
(Tabular Dollars in Thousands, Except Share and per Share Data)
date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, Topic 842 was amended to allow entities to elect to postpone adoption until fiscal years beginning after December 15, 2021
The Company adopted this new standard on January 4, 2022 and elected to apply the provisions of this standard to the beginning of the period of adoption, with certain practical expedients available. The Company elected to adopt the package of practical expedients to account for existing capital leases and operating leases as finance leases and operating leases, respectively, under the new guidance, without reassessing (a) whether the contracts contain leases under the new standard, (b) whether classification of capital leases or operating leases would be different in accordance with the new guidance, or (c) whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs in the new guidance at lease commencement.
The Company elected to adopt the available practical expedient to use hindsight in determining the lease term and in assessing impairment of the Company's right-of-use assets.
As both lessee and lessor, the Company elected the practical expedient to not separate lease and non-lease components, such as common area maintenance fees, by class of underlying asset and is applying this expedient to all relevant classes.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers' 2025 Franchise Disclosure Document, the company adopted the new lease standard, ASC 842, on January 4, 2022. This adoption involved applying the provisions of the standard to the beginning of the adoption period, utilizing certain practical expedients.
Specifically, Checkers chose to adopt a package of practical expedients to account for existing capital and operating leases as finance and operating leases, respectively, under the new guidance. This was done without reassessing whether the contracts contained leases under the new standard, whether the classification of capital or operating leases would differ according to the new guidance, or whether the unamortized initial direct costs before transition adjustments would have met the definition of initial direct costs in the new guidance at lease commencement.
Furthermore, Checkers elected to use hindsight in determining the lease term and in assessing impairment of the company's right-of-use assets. As a result of adopting ASC 842, Checkers recognized an operating lease liability of $229.6 million and an operating right-of-use asset of $193.6 million on January 4, 2022. They also recognized a financing lease liability of $0.6 million and a financing right-of-use asset of $0.3 million, with a cumulative adjustment of $38.6 million recorded to beginning retained earnings on the same date.
For a prospective franchisee, this means that Checkers' financial statements from January 4, 2022, onward reflect the ASC 842 standards for leases. Understanding these accounting changes is crucial for interpreting Checkers' financial performance and lease obligations, as prior periods were not revised and continue to be reported under the previous standard, ASC 840.